Ah, the rich are different from us. In case you don’t believe writer Scott Fitzgerald in pre-Great Depression America, ask former estate agent Wendy Machanik in post-financial crisis South Africa.

Following exposure by a whistleblower, Machanik admitted stealing R27-million of her clients’ trust account money. Since then, the sentencing deal she struck with the Specialised Commercial Crime Unit has elicited gasps in the world of criminal lawyers. Gasps of envy.

On 90 counts of theft she was last week given correctional supervision and fined R1.5-million, to be paid on a generous instalment system of R300 000 down and the balance at R25 000 per month. On two counts of not keeping proper trust account records she was fined R1 000 or 12 months jail, suspended for three years.

All charges were withdrawn against co-accused Bruce Bernstein, her former accountant. Bernstein appears to have been the sap in the whole set up, not personally benefitting from the thefts which – according to an independent forensic investigation – involved fictitious accounts, money being laundered in Angola, and tax-free handouts to Machanik’s 20-year younger ‘toy boy’ lover, a mysterious Israeli.

Aside from renovating her mansion with the stolen money and keeping her little Porsche runabout on the road, Machanik also spent R80 000 on a pair of earrings. In her defence, we should note that these were bought at a charity auction, which just goes to show what a mensch our Wendy is a regular Ms Robin Hood.

The Democratic Alliance’s justice spokesperson Debbie Schafer slammed the ‘disproportionately lenient’ sentence. ‘[It] is a bargain … steal R27-million and pay back 5.5% of it. The fine works out to about R16 000 per count’. And never a single day in jail.

Machanik however didn’t get away scot free, aside from the fine. Her two years of courtroom appearances and behind the scenes finagling a plea bargain took their toll. Her old soft-focus publicity photographs, showing a coiffed Johannesburg socialite, are at odds with recent newspaper pictures taken on court precincts of a haggard old lady, now more bejowelled than bejewelled.

In February last year Machanik’s lawyers had to ask for a postponement of the case because she lacked funds to pay for her defence. They painted a picture of an ‘emotionally shattered and financially destroyed’ woman.

At last week’s hearing her advocate had to paint a slightly different picture. Though reduced to depending upon the kindness of others – two friends had contributed the initial R300 000 of the fine and she would have to ‘rely on donations going forward’ – he also assured Magistrate Phillip van Niekerk that Machanik was employed and working hard.

Critical to sentencing are the issues of damage and restitution. It would have weighed heavily with Van Niekerk, when deciding on whether to accept the plea bargain, that amazingly none of Machanik’s clients are any longer out of pocket.

In fact, far from her trust account being illegally in the red, as it was when the investigators descended, when Machanik’s estate agency was liquidated some months back it miraculously had a surplus of R1-million in its trust account. All Machanik would admit to in her plea statement is that ‘the shortfall has been replenished with several loans’.

The intriguing question is who would lend around R27-million to a convicted thief who supposedly has to count on ‘donations’ to pay her fine? With such wonderful friends, it is odd too that she didn’t tap them rather than steal from clients.

The Estate Agency Board, through its lawyer Andrew Scarrott, makes the critical point: ‘The fact that an estate agent may repay the funds that have been misappropriated … constitutes theft.

The mechanics of Machanik’s machinations remain impenetrable without considerable further investigative resources being applied. Better, the National Prosecuting Authority presumably reasoned, to cut a deal and focus on the many other cases it has on its plate.

The reality is that embezzlement delivers a sound cost-benefit return to white-collar criminals. While public sector corruption, rightly, arouses condemnation, a crooked socialite gets sympathy and soft loans.

Unless you have an investigative team of trained accountants specialising in fraud you will never get to the bottom of any complex cases. I worked with the old Special Investigative Unit for Commercial Crimes and even they were just not experienced enough, plus overloaded with cases.

In one of my early cases in 1979 we had a team of accountants working for a year before they gave up.

Paul

I lost interest after reading “..Wendy Machanik in post-financial crisis South Africa.”.
Post crisis? If that’s your opinion, the rest matters not.

johnbpatson

Good point but at least she was arrested, presumably held in holding cells, and then charged and tried in court.
She will probably not be traveling to the US or Israel soon either, at the risk of getting to know Madoff much better.
Contrast that with well known corrupt public sector officials who are not arrested, never charged and end up being on ANC provincial executive committees with the task of choosing the country’s new leader.
All this with detailed dockets prepared showing very strong cases against them.

http://none Lyndall Beddy

How do any of us know that she did not plead guilty to a plea bargain just to avoid legal costs? In her circumstances she can’t get legal aid.

http://roryshort.blogspot.com/ Rory Short

Wendy, a sad and mis-guided person like anyone who steals from others.

Mr. Direct

So let’s see, she stole, was caught, she paid everything back, paid two years of legal fees, has to pay a R1.5M fine over the next how many years.

I guess a prison sentence would mean that she becomes a drain on public funds, where now she pays a fine that theorectically contributes towards the public.

Initially I thought that the sentence was really light, but on the whole, does not seem too bad considering there are no real victims, no drain on the public coffers, and if she looks haggered, then she has been through some hell, and then at least been taught a lesson.

Of course, not sure how she will be able to raise the funds, considering that her name is tarnished. She must have some really good friends, that I guess own her just a little now….

http://africanjungle.iblog.co.za/ Julian Frost

@Mr. Direct: I may have misunderstood, but it comes across like she DIDN’T pay everything back. That’s why we’re so upset.

http://none Lyndall Beddy

Let me explain why I think we have insufficient facts in this case. In the days when I was appointed as a Liquidator/Trustee I handed the cases of both attorneys and estate agents, both of whom have Fidelity Fund cover, who had gone insolvent.

Wendy has been given permission to work again, presumably as an estate agent. In my day no trustee would give that permission if other people’s money had been stolen from the trust account.

If Wendy’s personal estate is not sequestrated but only her companies liquidated, then the situation is even more murky, because no liquidator of her companies would not sequestrate her personal estate if she was personally liable, and not the collapse of the property market, for the collapse of her businesses.

Plus I noticed that Tokyo Sexwale has totally restructured not only the Estate Agents Board, but has the whole structure being investigated by a commission.

http://none Lyndall Beddy

Plus it is not possible for any attorney or estate agent to “steal from the poor”. Their Fidelity Fund insurance pays out any missing monies – that is why they have to have it!

LittleBobPete

William, interesting blog!

Whilst the case in reference has been dealt with, albeit not to many’s satisfaction, lets look at the other which seem to have got away with it: –

The rich have ways of evading real accountability! What should happen with thse serial delayers of trials is that bail should be revoked and then it would speed up their desire for a trial and potentuial punishment to be over……

Mr. Direct

@Julian Frost

I may also be mistaken, but this article reads that R27M was stolen from the trust account, but when it was liquidated with R1M profit, the author questions who would lend R27M to a convicted fraudster. And the previous paragraph states “none of Machanik’s clients are any longer out of pocket.”

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This Jaundiced Eye column appears in Weekend Argus, The Citizen, and Independent on Saturday. WSM is also a book reviewer for the Sunday Times and Business Day. Follow @TheJaundicedEye.